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Article
Alternative Technical Efficiency Measures: Skew, Bias and Scale
Economics - All Scholarship
  • Qu Feng, Nanyang Technological University
  • William C Horrace, Syracuse University
Document Type
Article
Date
6-24-2010
Keywords
  • stochastic frontier model,
  • relative efficiency measure,
  • two-sided measure,
  • bias,
  • bootstrap confidence intervals
Disciplines
Description/Abstract

In the fixed-effects stochastic frontier model an efficiency measure relative to the best firm in the sample is universally employed. This paper considers a new measure relative to the worst firm in the sample. We find that estimates of this measure have smaller bias than those of the traditional measure when the sample consists of many firms near the efficient frontier. Moreover, a two-sided measure relative to both the best and the worst firms is proposed. Simulations suggest that the new measures may be preferred depending on the skewness of the inefficiency distribution and the scale of efficiency differences.

Source
local input
Creative Commons License
Creative Commons Attribution 3.0
Citation Information
Qu Feng and William C Horrace. "Alternative Technical Efficiency Measures: Skew, Bias and Scale" (2010)
Available at: http://works.bepress.com/horrace/7/